External analysis

A starting company faces a lot of threats, but fortunately also a lot of opportunities. These opportunities and threats are generated by the market. Therefore, in order to determine the opportunities and threats you have to analyse the market. Usually this analysis is called an external analysis. It analyses the external environment of the company. This external analysis consists of different parts:

Ø DESTEP

Any company operates under circumstances over which it has only limited control. These circumstances are the ‘Macro environment’ of the company, and are generally subdivided into six factors: Demographic, Economic, Social-cultural, Technological, Ecological, and Political-legal factors. Together they form the acronym DESTEP. DESTEP factors are developments in society which influence the entire industry. Take the livestock sector: a growing environmental awareness has and has had great influence on this industry. You can also imagine that a shift in the composition of the population (age or cultural background) will affect the food sector.

Determine which macro-environmental factors have a big influence on the industry you will be operating in and analyse those factors.

Ø Competition

Whatever business you are planning, there are always others with the same brilliant ideas who offer a product very much like your own. This is what we call competition within the industry or sector. Before starting your own firm, it is useful to have a look at the industry. Is it highly competitive, growing or decreasing, or is it dominated by one powerful market leader? In most countries there is a governmental institution that gathers a lot of statistical information on industries, or business sectors. And most of them use a standardised system to determine what industry your company belongs to. Maybe the website of the Chambers of Commerce could give you a lead.

· determine in as much detail as possible (and do not be too easily satisfied!) to which industry or market segment your company belongs.

· Determine the development of the number of competitors within your industry or market.

· which of your competitors are most important, form the most influential threats for your own company and why?

· is it likely that new competitors will enter the industry or the market within five years? Provide a sound motivation.

Ø Customers: needs, behaviour, market segments

After having analysed the DESTEP factors and the competition you will have some idea about what the industry looks like. Now you have to find out what the size of the market is, which segments or target groups you are going to serve and what the exact product is you are going to offer. In short: you have to define your market. To define your market, you might have to answer the following questions:

· what are the geographical boundaries?

· what are the characteristics of our customers? (individuals, families, companies, government)

· what needs are we satisfying?

· with what product or service are we going to satisfy our customer’s needs?

By answering these questions you have defined your potential market. Within this market you have to win your own customers. To do so you need to know something about the size of that potential market and about the changes in demand during the last few years.

· give a reliable estimate of the size of the potential market in relevant units (number of customers, total revenues, units sold etc.).
Don’t forget to state your sources!

· are any shifts in demand to be expected in the next three years (this is not only about the size of the market)?

When offering a product or service, you must start by looking at the needs and behaviour of the target group (the marketing concept), putting your client in the centre of attention.

Like Paul Simon already said, “You’ve got to keep your customer satisfied”. You will therefore have to investigate the needs and behaviour of the potential buyers. In order to define target group(s) you will have to find groups of customers that have some things in common in relation to your product or service.

· what kind of criteria will you be using to split-up the market in segments?

· give a detailed description of the segments you find.

Дата добавления: 2015-10-31